The International Monetary Fund’s (IMF) World Economic Outlook (WEO) released in April 2016 updated gross domestic product (GDP) estimates for more than 200 of the world’s economies. For Africa, the update reflected another shift in the leaderboard for the continent’s largest economy.
After losing its top spot to Nigeria in 2014 following the West African country rebasing its GDP, South Africa moved down to third place at the end of 2015 largely due to its weakened currency. Egypt had moved into the second position, based on US dollar calculations of each country’s GDP.
Since the Nigerian naira was devalued on June 20 this year, there have been sporadic reports in local and international media suggesting that Nigeria would soon surrender its crown as Africa’s largest economy due to the impact of a weak naira on the US dollar value of economic activity. A significant recovery in the South African rand in July and August so far has added to this speculation. The latest round of reports (during the second week of August) indicated that South Africa had again overtaken Nigeria in terms of the US dollar value of their respective GDP readings. No mention was made of Egypt in these reports.
However, the calculations behind this assertion are methodologically incorrect. The reported US dollar estimates are based on GDP data from the end of 2015 while the exchange rate readings are from August 2016. The time difference between the two data points makes these calculations spurious at best and not really a reliable indicator of recent developments. In order to reflect the impact of the naira devaluation and the rand’s recovery on comparable GDP estimates, a calculation would need to be made based on GDP data for the second quarter of 2016. At the time of writing, none of the continent’s largest economies had published these statistics.
Christie Viljoen is a senior economist at KPMG.